Basically, Google is trying to convince broadband providers to let it place caches within their networks — effectively, pursuing the same architecture that a deep-footprint CDN like Akamai uses, but for Google content alone.

Much of the commentary around this seems to center on the idea that if Google can use this to obtain better performance for its content and applications, everyone else is at a disadvantage and it’s a general stab to net neutrality. (Even Om Malik, who is not usually given to mindless panic, asserts, “If Google can buy better performance for its service, your web app might be at a disadvantage. If the cost of doing business means paying baksheesh to the carriers, then it is the end of innovation as we know it.”)

I think this is an awful lot of hyperbole. Today, anyone can buy better performance for their Web content and applications by paying money to a CDN. And in turn, the CDNs pay baksheesh, if you want to call it that, to the carriers. Google is simply cutting out the middleman, and given that it accounts for as more traffic on the Internet than most CDNs, it’s neither illogical nor commercially unreasonable.

Other large content providers — Microsoft and AOL notably on a historical basis — have built internal CDNs in the past; Google is just unusual in that it’s attempting to push those caches deeper into the network on a widespread basis. I’d guess that it’s YouTube, more than anything else, that’s pushing Google to make this move.

This move is likely driven at least in part by the fact that most of the broadband providers simply don’t have enough 10 Gbps ports for traffic exchange (and space and power constraints in big peering points like Equinix’s aren’t helping matters, making it artificially hard for providers to get the expansions necessary to put big new routers into those facilities). Video growth has sucked up a ton of capacity. Google, and YouTube in particular, is a gigantic part of video traffic. If Google is offering to alleviate some of that logjam by putting its servers deeper into a broadband provider’s network, that might be hugely attractive from a pure traffic engineering standpoint. And providers likely trust Google to have enough remote management and engineering expertise to ensure that those cache boxes are well-behaved and not annoying to host. (Akamai has socialized this concept well over much of the last decade, so this is not new to the providers.)

I suspect that Google wouldn’t even need to pay to do this. For the broadband providers, the traffic engineering advantages, and the better performace to end-users, might be enough. In fact, this is the same logic that explains why Akamai doesn’t pay for most of its deep-network caches. It’s not that this is unprecedented. It’s just that this is the first time that an individual content provider has reached the kind of scale where they can make the same argument as a large CDN.

The cold truth is that small companies generally do not enjoy the same advantages as large companies. If you are a small company making widgets, chances are that a large company making widgets has a lower materials cost than you do, because they are getting a discount for buying in bulk. If you are a small company doing anything whatsoever, you aren’t going to see the kind of supplier discounts that a large company gets. The same thing is true for bandwidth — and for that matter, for CDN services. And big companies often leverage their scale into greater efficiency, to boot; for instance, unsurprisingly, Gartner’s metrics data shows that the average cost to running servers drops as you get more servers in your data center. Google employs both scale and efficiency leverage.

One of the key advantages of the emerging cloud infrastructure services, for start-ups, is that such services offer the leverage of scale, on a pay-by-the-drink basis. With cloud, small providers can essentially get the advantage of big providers by banding together into consortiums or paying an aggregator. However, on the deep-network CDN front, this probably won’t help. Highly distributed models work very well for extremely popular content. For long-tail content, cache hit ratios can be too low for it to be really worthwhile. That’s why it’s doubtful that you’ll see, say, Amazon’s Cloudfront CDN, push deep rather than continuing to follow a megaPOP model.

Ironically, because caching techniques aren’t as efficient for small content providers, it might actually be useful to them to be able to buy bandwidth at a higher QoS.